China's EU Exports Face Tariff-Driven Trade Diversion

This CEPR research examines the mechanisms through which tariffs on Chinese exports to the European Union create trade diversion effects, redirecting shipments to alternative markets and altering established trade patterns. The analysis reveals that tariff barriers don't simply reduce volumes uniformly; they reshape the geographic distribution of Chinese exports, forcing suppliers to recalculate sourcing strategies and transportation routes. For supply chain professionals, this study underscores a critical reality: tariff structures act as invisible architects of global logistics networks.

When tariffs rise on direct China-to-EU routes, exporters don't merely absorb costs, they redirect inventory, explore transshipment hubs, and reevaluate supplier networks. This creates cascading operational challenges including longer lead times, increased inventory holding costs, and exposure to secondary tariff regimes in transit countries. The strategic implication is clear: companies with China-EU supply chains must actively model tariff scenarios and diversify sourcing geographies now.

Passive acceptance of tariff costs will erode margins; proactive network redesign, whether through nearshoring, alternative sourcing countries, or strategic inventory positioning, becomes a competitive necessity. This research validates the urgency of supply chain resilience planning.